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Tuesday, 30 August 2016

European banks preparing for 'worst possible scenario'

Banks
getting ready for ‘economic nuclear winter’

RT,

29
August, 2016

Weak
corporate earnings, a banking crisis, and the Brexit vote are forcing
banks to prepare for the worst case scenario in the second half of
the year. According to CNBC quoting a major lender, banks are
"preparing for an economic nuclear winter situation."

"This
could mean triggering Article 50, a referendum in other European
nations leading to a break-up of the euro or sterling hitting below
$1.20 or lower. The banks are ready for anything now," the
source in the bank told the
broadcaster.

After
the United Kingdom voted to leave the European Union in June, there
have been talks a similar referendum may be held in France, the
Netherlands and other countries.

"Markets
hate uncertainty and the events this year have unfortunately created
a lot of mystery around what is going to happen next," the
source added.

Shares
in the biggest banks have been plummeting. Deutsche Bank has lost
almost 45 percent, Credit Suisse has lost 41 percent and the Royal
Bank of Scotland went down 35 percent in 2016. Uncertainty and
volatility has been spotted in all areas of the economy from mining
to car production.

By
far, Brexit has been the biggest uncertainty on the global financial
agenda, but analysts urge companies to keep on working despite the
unclear future and make steps to "de-risking
and simplifying their businesses."

"I
think the main problem for the second half of the year is the
uncertainty caused by Brexit, though that's likely to persist for two
years or more, so I suspect companies are likely to roll up their
sleeves and get on with their business," Laith
Khalaf, senior analyst at Hargreaves Lansdown told CNBC.

Hit
by the sharp decline in oil prices the Canadian economy is struggling
with a property market approaching the peak of a massive bubble,
according to ex-Lehman Brothers trader and a financial writer Jared
Dillian.

As
Canada’s mortgage market is not securitized, the property crisis is
expected to last much longer than in the US, where the loans are
backed, Dillian said in an interview with Mauldin Economics.

The
former trader says when the bubble bursts; it will be quite different
from the sharp and sudden crisis in the US in 2008, due to the
structure of the Canadian mortgage market.

According
to him, almost all mortgages in Canada are “recourse
mortgages”,
with homeowners behind on payments not able to able to walk away.....